Banks face fines for breaching benchmark safeguards in EU plan: BRUSSELS, Sept 18 — Banks risk fines as high as 10 per cent of their yearly sales for failing to set up adequate safeguards to combat benchmark rigging, under European Union anti-manipulation rules to be presented today. Michel Barnier, the EU’s financial services chief, will also seek to empower regulators to force banks to take part in some benchmark-setting panels in proposals targeting scandals that began with the London interbank offered rate, or Libor, and spread across the financial system. Benchmarks from oil to foreign exchange are being probed by global regulators as they seek to restore trust in rates undermined by evidence of endemic rigging. Authorities have fined UBS AG, Barclays Plc and Royal Bank of Scotland Group Plc about US$2.5 billion (RM8.1 billion) for distorting Libor and other interbank rates. Other firms are under investigation around the world. “Benchmarks are essential to many financial instruments,” Barnier said in Frankfurt last week. “Doubts about their accuracy and integrity can undermine market confidence, cause significant losses to consumers and investors and distort the real economy. We need to take steps to make sure this doesn’t happen again.” Banks and other participants in benchmarks, as well as administrators of the rates, could be fined for failing to follow ground rules that seek to mitigate conflicts of interest and reduce the potential for rate-rigging, according to a draft obtained by Bloomberg News last week. Benchmark participants would also be forced to sign a legally binding code of conduct setting out their obligations, according to the draft. Fining powers Regulators would be able to fine companies as much as €1 million or 10 per cent of their annual revenue, whichever is greater. National governments will be free to grant regulators even tougher fining powers. While early versions of the proposals would have taken oversight of critically important benchmarks out of national hands, the final blueprint doesn’t go this far. Libor and other “critical benchmarks” would be overseen by “colleges” of national regulators including the European Securities and Markets Authority. ESMA, based in Paris, would be given power to solve disagreements between them, according to the draft. Critical benchmarks are defined as those underpinning at least €500 billion of contracts in more than one EU nation, according to the draft. Rate setting Regulators could force banks to take part in setting such a rate if it has lost, or is “likely” to lose 20 per cent of its member banks, according to the draft. The Brussels-based European Commission, where Barnier is responsible for drafting financial laws, also scrapped plans to set common rules on how investors who lose money from rate-rigging can sue. The rules would apply to “all published benchmarks that are used to reference a financial instrument traded or admitted to trading on a regulated venue,” as well as those that measure the performance of an investment fund, according to the draft. An exemption would apply for rates set by EU central banks. Benchmarks would have to be based on real transaction data where possible, under today’s plans, which also allow for some special treatment of benchmarks underpinning the commodity markets because of their “sector-specific characteristics.” The proposals require approval by national governments and by EU parliament lawmakers before they can take effect. — Bloomberg dlvr.it/3zkB8C
Posted on: Tue, 17 Sep 2013 23:59:24 +0000
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